Australand deserves at least 10pc premium: CS

Diversified property giant
GPT
will have to offer
Australand
investors a premium to book value of at least 10 per cent if it wants its partial takeover to be successful, according to Credit Suisse analysts.

GPT is angling to take over Australand’s commercial and industrial business. At June 30, the assets had a book value of $2.5 billion. Australand’s board on Friday rejected GPT’s initial approach, which the takeover target said offered only $140 million more than book value for the commercial assets – a premium of about 5 per cent.

Credit Suisse says the 10 per cent-plus premium is necessary to compensate investors for being left holding stock in a purely residential developer, rather than the diversified group they now hold a stake in, for transaction costs, for foregoing improving returns in the commercial and industrial business and for foregoing potential cap rate compression.

Credit Suisse says GPT may raise its bid price or change its bid structure, after stating it is “committed to advancing a proposal". This may include making a play for the whole company, in conjunction with a residential partner.